India has seen one of the most spectacular economic overhauls since the independence since Narendra Modi led BJP came to power at the Centre. This is being praised as one of the biggest tax reforms in the country. There is much bally-hoo around the impact of the moves that the Central government has taken in the last one year, and the sluggishness that has affected the economy at large, also Manmohan Singh has warned about the tax terrorism that may ensue from the above moves.
Such apprehensions about the presence of tax terrorism is well placed, and the government has also taken certain steps to ensure the way forward. It may also be well placed to figure out what exactly Narendra Modi has tried to achieve by taking bold steps to create an economic narrative for India.
The first bold move that has had the most significant impact is Demonetisation, which has put in place a greater reliance on electronic modes of payment, the financial inclusion that the move resulted in, is also commendable. With this many people with almost no incomes, and habitually avoiding the taxman, have now come into the net of the taxman too. Many people who had shell companies, meant for the purposes of tax evasion have also faced the wrath of the second bold move, the de-registering of shell companies. The third bold move is the largest tax overhaul in the Indian economy, which is the implementation of Goods and Services Tax, which is again seeking to do away with multiple taxes and put in place one uniform taxation regime for the whole nation. This will make the indirect tax collection in India more efficient.
Yet, these have the fears of the tax officials exercising their influence to extort and bully taxpayers over arrears of taxes, refunds, and assessments. There have been occasions and cases before the Income Tax Appellate Tribunal, NCLAT and other forums like the Sales Tax Tribunal, etc have seen plenty of cases which have been attributed to tax terrorism by tax authorities.
The Indian economy is the world’s largest ‘indirect tax based economy’ the direct tax collection has remained faulty and the disciplining of the masses has never been taken up by any leader, yet Modi-nomics has shed all its fears pertaining to any sort of appeasement and has aimed to increase the revenue receipts of the nation by pushing for transparency in monetary dealings, income disclosure, tax payments and other aspects pertaining to assets in the form of land, gold, or securities, that aim to bring in more revenues to fund the reformist agenda of the current regime.
It is not a folly to accept the long-term impacts of the moves that have hit the economy, as this is a large-scale disciplining exercise which will bring many people to the books for evading taxes. Thus in the due process the tax authorities will be dealing with the assessees, with greater powers.
The Income Tax department is already mulling on a plan to introduce jurisdiction free assessment, where any IT official placed in any part of the country may assess and deal with the case anonymously through an electronic platform, which will ensure transparency and efficient administration of tax authorities.
There is large-scale automation where the taxpayers are dealing with computer programs that use the mnemonics to yield in the possible outcome of their cases, and tracks refunds a,d ensures redressal of grievances. The tax terrorism may happen for those who have committed anything contrary to the needs of the taxman, while the honest people will not be facing much troubles.
Though the government must ensure that if such a problem arises then they must be equipped with the correct resources and manpower to deal with any such contingency and produce a citizen friendly experience, while catching hold of the tax evaders.